Andy Coulson thought the idea that Milly Dowler had left home and gone to work in a factory in Telford in 2002 was "nonsense", the phone-hacking trial has heard.

The former News of the World editor said he had no idea that his news team had despatched a team to the Midlands to investigate the lead or that the tip had, in fact, come from a hacked voicemail on the 13-year-old's phone.

Coulson said that he remembers the newspaper's belief at the time was "sadly" that the most likely scenario was that Dowler was dead.

In an intense two hours of questioning about the Dowler story, Coulson also testified that he did not have any conversation with Rebekah Brooks about the article that was printed in the paper on 14 April 2002 mentioning a voicemail.

He also said that he did not know at the time that hacking was a crime and that if he knew any of his staff were involved in the unlawful activity he would have viewed it as "intrusive" and "lazy journalism".

In the witness box for the second day at the hacking trial, Coulson told jurors that he remembered someone at the time suggesting that Dowler, who had vanished the previous month, was "going to take a job in a factory".

"That's what I remember. It may have come out in conference. It might have been said to me and I'm very clear about my memory of it. I thought it was nonsense," Coulson said.

"Why?" asked his defence counsel Timothy Langdale QC.

"Because Milly Dowler was a 13-year-old schoolgirl and she was a 13-year-old who for all the wrong reasons had been pictured across all the national newspapers.

"The family had released video footage of her which was very moving and used widely by probably every news broadcaster in the country.

"The idea that she could move north and then take a job in a factory just seemed ludicrous."

The jury has previously heard that Dowler's phone was hacked on 12 April 2002 and the tabloid reported two days later "a new twist" in the search for the missing schoolgirl "after messages had been sent to her mobile phone after she vanished".

It has also heard that the tabloid sent at least eight reporters and photographers to an Epson ink-cartridge factory hoping to land a scoop.

Coulson said he did not remember reading the story at the time but reading it now said the reference to "messages" did not necessarily infer hacking. "I do not think it is clear. I think I might have concluded that it may have come from sources, possibly even police sources," he said.

"The first thing is I do not remember the story," he said explaining to jurors that he might have thought police were involved in the story because there was no "exclusive" or "News of the World investigates" logo on the story. That suggested to him the story may have been a tip that had been passed to several Sunday papers.

He said if he had been told one of his staff had hacked the phone his instinct would have been it was wrong.

"If you had been made aware that somebody at the instigation of the NoW was accessing voicemail on Milly Dowler's phone, what would your reaction have been?" asked Langdale.

Coulson replied: "My instinctive concern was that this was interference with a police investigation."

He told the jury he was not aware of hacking generally and not aware that Dowler's phone was hacked or that a team was despatched to chase the story down.

Asked if he would have been told about a team being sent to Telford, he replied: "Not necessarily, that's the news editor's job."

Neville Thurlbeck, the paper's former chief reporter who has already pleaded guilty to hacking, was the news editor on the day, Coulson said.

The News of the World dumped its first edition account of the voice message and in the third edition reported that the police believed that the job offer message was the work of a "sick hoaxer" who had also contacted BBC's Crimewatch.

The story was also moved from page 9 to page 30, replacing what Coulson described as a "glamorous" story featuring a picture of scantily glad Star Trek actor Jolene Blalock in a bikini.

Coulson repeated that he had not read the article and believed he would not have thought a story about a hoax merited a prominent slot.

"Hoaxes are not really stories by their nature and this is a hoax wrapped in a riddle. I don't think I rated this story," he added.

"I think I moved this story looking back at this distance, for cosmetic reasons, he said, explaining that he didn't generally want "all the serious content squeezed together, you want to space it out".

The jury was told that the Star Trek picture story on page 30 in the first edition was moved to page 11, two pages after the Dowler story was placed. The page 11 story was a "serious" story headlined "SBS kill 100 Al-Qaida" and that moved to page 9 replacing the Dowler story.

It was the first time the jury was given Coulson's version of events about the Dowler story which is central to the crown's case against him and Rebekah Brooks.

He was deputy editor at the time of the Dowler story but was on editing duty because Brooks was on holiday in Dubai.

The jury have heard that she made calls to the office while on holiday including one that lasted 38 minutes. Coulson denied having any conversation with her about the Dowler story.

Coulson told jurors he did not recall having a conversation with Brooks about the Dowler story when she returned from holiday.

Asking to make a point for clarification, he added: "I think it's possible I would have avoied a conversation about Milly Dowler because I had made a mistake in the paper; in relation to the mix [of serious and glamorous content] in the paper. I wouldn't have liked to highlight that I got the mix wrong in the first edition."